Opening the “Black Box” of Network Externalities in Network Adoption

Robert J. Kauffman (), James McAndrews and Yu-Ming Wang ()
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Robert J. Kauffman: Carlson School of Management,University of Minnesota, Minneapolis, Minnesota 55455
Yu-Ming Wang: College of Business Administration, California State University, Long Beach, California 90840

Information Systems Research, 2000, vol. 11, issue 1, 61-82

Abstract: Recent theoretical work suggests that network externalities are a determinant of network adoption. However, few empirical studies have reported the impact of network externalities on the adoption of networks. As a result, little is known about the extent to which network externalities may influence network adoption and diffusion. Using electronic banking as a context and an econometric technique called hazard modeling , this research examines empirically the impact of network externalities and other influences that combine to determine network membership. The results support the network externalities hypothesis . We find that banks in markets that can generate a larger effective network size and a higher level of externalities tend to adopt early, while the size of a bank's own branch network (a proxy for the opportunity cost of adoption)decreases the probability of early adoption.

Keywords: duration models; economic analysis; electronic banking; financial services; hazard function; IT investment; network externalities; network goods; technology adoption (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:orisre:v:11:y:2000:i:1:p:61-82

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